ROGELIO R. MACAPALAN, PETITIONER, VS. THE HONORABLE BETHEL KATALBAS-MOSCARDON, PRESIDING JUDGE-DESIGNATE, RTC OF NEGROS OCCIDENTAL, BRANCH 52, AND RPB VENTURE CAPITAL CORPORATIO…

At the core of this petition for review on certiorari
assailing the orders of the Regional Trial Court of Bacolod City dated July 18,
1991 and August 12, 1991, and around which revolves the arguments of the
parties, is the applicability of Section 5, subsections (a) and (b) of
Presidential Decree No. 902-A.^[1]
Petitioner submits that the action which he brought against private respondent
is cognizable solely by the trial court. On the other hand, private respondent espouses the original and
exclusive jurisdiction of the SEC.

The pertinent antecedent facts, culled from the pleadings are, as
follows:

On June 30, 1987, Mandalagan Development Corporation (MDC),
represented by Bacolod Shrimpmate, Inc. (BSI) as attorney-in-fact, mortgaged
its Lot No. 1435-A including the improvements thereon, covered by Transfer
Certificate of Title No. T-71254, to private respondent RPB Venture Capital
Corporation to secure the payment of a loan in the amount of P1,050,000.00. The loan was obtained by BSI.

For failure of BSI to pay the loan, private respondent foreclosed
the mortgage and subsequently caused the public auction sale of the land on
November 15, 1989. The land was sold to
private respondent, being the only bidder. On January 15, 1990, it registered the certificate of sale.

On January 23, 1991, petitioner Rogelio R. Macapalan, member of
the Board of Directors of MDC, filed a complaint against private respondent for
annulment of the real estate mortgage and foreclosure sale with preliminary injunction
before the Regional Trial Court, docketed as Civil Case No. 6341. He alleged therein that although the real
estate mortgage was supported by a resolution, it is null and void for being an
ultra vires act of MDC. The amended article of incorporation of MDC do not authorize
encumbrance of its property to secure the loans of other persons, whether
natural or juridical.

On June 26, 1991, private respondent filed a motion to dismiss on
the ground that the trial court has no jurisdiction over the subject or nature
of the action.

On July 18, 1991, the trial court issued an order dismissing
petitioner’s complaint. It was
convinced that it did not have jurisdiction over the case because:

“x x x the issue at bar involves, in line with plaintiff’s
contention, devises or schemes by or any acts of the Board of Directors of
Mandalagan Development Corporation of which plaintiff is a stockholder,
amounting to fraud and misrepresentation detrimental to the interest of x x x
the stockholders x x x. Furthermore, this
involves a controversy arising out of intra-corporate relationship between
plaintiff-stockholder and the corporation of (sic) which he belongs. Undoubtedly, the case in point comes within
the purview of the regulatory and adjudicative function of SEC over
corporations specifically defined under Sec. 5 (a & b) of PD 902-A.”^[2]

The motion for reconsideration was denied
in the order dated August 12, 1991.^[3]
Hence, the present petition.

The sole issue raised herein is whether or not the trial court
correctly applied Section 5, subsections (a) and (b) of Presidential Decree No.
902-A in dismissing Civil Case No. 6341.

Petitioner asserts that Civil Case No. 6341 falls squarely within
the jurisdiction of the trial court as shown by the allegations of the
complaint. It does not involve issues
arising from intra-corporate relationship. The subject transaction is not a device or scheme designed to defraud
private respondent or the public.

Private respondent maintains that the Securities and Exchange
Commission should exercise jurisdiction over the case. It is a suit commenced by a
stockholder/director arising from schemes and devices employed by the Board of
Directors of MDC to the prejudice of the public and its own stockholders. The issue arose out of intra-corporate
relationship among the stockholders of MDC and BSI.

We do not agree with private respondent and we find for
petitioner. The trial court erred in
dismissing Civil Case No. 6341.

Section 5, subsections (a) and (b) of P.D. No. 902-A, which
served as basis for the trial court’s dismissal of the case, provides:

“SEC. 5. In addition to the regulatory and adjudicative functions
of the Securities and Exchange Commission over corporations, partnerships and
other forms of associations registered with it as expressly granted under
existing laws and decrees, it shall have original and exclusive jurisdiction to
hear and decide cases involving:

(a)  
Devices or schemes employed by, or any acts of, the Board of
Directors, business associations, its officers or partners, amounting to fraud
and misrepresentation which may be detrimental to the interest of the public
and/or of the stockholders, partners, members of associations or organizations
registered with the Commission.

(b)  
Controversies arising out of intra-corporate or partnership
relations, between and among stockholders, members, or associates; between any
and/or all of them and the corporation, partnership or association of which
they are stockholders, members or associates, respectively; and between such
corporation, partnership or association and the state insofar as it concerns
their individual franchise or right to exist as such entity.”

The persistent confusion concerning said
original and exclusive jurisdiction of the SEC has been clarified as early as
November 28, 1983, in the case of Union Glass and Container Corporation, et
al. v. SEC, et al.,^[4] where
we said:

“This grant of jurisdiction must be viewed in the light of the
nature and function of the SEC under the law. Section 3 of PD No. 902-A confers upon the latter ‘absolute
jurisdiction, supervision, and control over all corporations, partnerships or
associations, who are grantees of primary franchise and/or license or permit
issued by the government to operate in the Philippines x x x.’ The principal function of the SEC is the supervision and
control over corporations, partnerships and associations with the end in view
that investment in these entities may be encouraged and protected, and their
activities pursued for the promotion of economic development.

It is in aid of this office that the adjudicative power of the SEC
must be exercised. Thus the law
explicitly specified and delimited its jurisdiction to matters intrinsically
connected with the regulation of corporations, partnerships and associations
and those dealing with the internal affairs of such corporations, partnerships
or associations.

Otherwise stated, in order that the SEC can take cognizance of a
case, the controversy must pertain to any of the following relationships: [a] between the corporation, partnership or
association and the public; [b] between the corporation, partnership or
association and its stockholders, partners, members, or officers; [c] between
the corporation, partnership or association and the state in so far as its
franchise, permit or license to operate is concerned; and [d] among the
stockholders, partners or associates themselves.

Obviously, the present case, which was
filed by petitioner as member of the Board of Directors of MDC against private
respondent, another corporation, does not fall under any of the aforequoted
enumeration. Moreover, petitioner’s
complaint does not contain any allegation of fraud or misrepresentation.^[5]
Therefore, neither subsection (a) nor subsection (b), Section 5 of P.D. No.
902-A applies.

Mention must likewise be made of the case of Viray, et al v. Court of Appeals, et al.,^[6] where we clarified further the
disquisition in the Union case, to wit:

“The establishment of any of the relationships mentioned in Union
will not necessarily always confer jurisdiction over the dispute on the SEC to
the exclusion of the regular courts. The statement made in one case that the rule admits of no exceptions or
distinctions is not that absolute. The
better policy in determining which body has jurisdiction over a case would be
to consider not only the status or relationship of the parties but also the
nature of the question that is the subject of their controversy.” (emphasis
supplied)

In order to ascertain the nature of the
question that is the subject of the controversy, we have to rely on the
allegations of the complaint, the truth of which is to be theoretically
admitted in considering the motion to dismiss.^[7]

In the present case, we do not find it necessary to resort to the
expertise of the SEC. Petitioner’s
complaint for annulment of the real estate mortgage and foreclosure sale with
preliminary injunction is an ordinary civil litigation, beyond the jurisdiction
of the SEC. It is true that the trend
is towards vesting administrative bodies like the SEC with the power to
adjudicate matters coming under their particular specialization, to insure a
more knowledgeable solution of the problems submitted to them. This would also relieve the regular courts
of a substantial number of cases that would otherwise swell their already
clogged dockets. But as expedient as
this policy may be, it should not deprive the courts of justice of their power
to decide ordinary cases in accordance with the general laws that do not require
any particular expertise or training to interpret and apply. Otherwise, the creeping take-over by the
administrative agencies of the judicial power vested in the courts would render
the judiciary virtually impotent in the discharge of the duties assigned to it
by the Constitution.^[8]

WHEREFORE, the petition is hereby GRANTED. The orders of the Regional Trial Court of
Bacolod City dated July 18, 1991 and August 12, 1991 are SET ASIDE. The trial court is directed to proceed with
the trial of Civil Case No. 6341 and to decide it with deliberate dispatch.

SO ORDERED.

Narvasa, C.J., (Chairman), Padilla, Regalado, and Puno, JJ.,
concur.

^[1]
Reorganization of the Securities and Exchange Commission with Additional Powers
and Placing the said Agency under the Administrative Supervision of the Office
of the President.

^[2]
Rollo, p. 6.

^[3]
Rollo, p. 7.

^[4]
G.R. No. 64013, 126 SCRA 31.

^[5]
See Abad, et al., v. Court of First Instance of Pangasinan, etc., et
al., G.R. Nos. 58507-08, 206 SCRA 567 (1992).

^[6]
G.R. No. 92481, 191 SCRA 308 (1990).

^[7]
Republic v. Sebastian, etc., et al., G.R. No. L-35621, 72 SCRA 222
(1976).

^[8]
Viray, et al., v. Court of Appeals, et al., supra.